India controls market previewJuly 2006

Overview

In 2005 the Indian market for building management systems (BMS) is estimated at approximately 63.2 USD million (HVAC segment only, not including fire and security segments). System sales and product sales comprise 53% and 44% respectively. The service part of the business is very small, due to the fact that the market is relatively young and price-sensitive. Despite the fact that the majority of customers are cost-oriented and a BMS system is perceived to be an expensive investment, energy efficiency concerns and changing attitudes of end-users are providing a strong basis for the development of the BMS sector.

It is forecasted that the BMS market will grow at 25-28% per year during 2006-2008. Thus, India can be considered as the key growth market for BMS companies. Given that the market is not mature, this tendency is very likely to continue in 2009-2010. The growth in the industry is supported by favourable economic conditions in general, namely a good investment climate and booming construction sector. Most of the growth is expected to come from BMS for the commercial sector as well as security solutions in the industrial sector and infrastructure.

Key market drivers

The construction sector in India is booming, both in residential and commercial sectors. Automation systems are more commonly installed in the commercial sector as the residential sector is typically equipped with individual AC systems (minisplits and ducted splits). Therefore, the growth in the BMS sector will correlate with commercial building and construction.

Secondly, the central plant market in India (that strongly correlates with the BMS market) is currently growing at 23% per year and the market for large chillers (centrifugal and screw) is expected to grow at 30% per year. In 2005, the centrifugal chillers market is estimated at 60,000 cooling tonnes and the market for screw chillers is estimated at 300,000 cooling tonnes.

There is a constant flow of foreign investment to the country and foreign companies tend
to be more open and spend more on high-end building control systems. In addition, there is a strong tax incentive for companies bringing foreign currency to the Indian economy (such as hotels, IT and banking). Such companies are exempt from the duty tax and can import a chiller with only 5% tax. This allows companies which are eligible for the incentive to import and install more efficient and expensive AC systems. Therefore, such companies can be targeted by BMS companies.

Major market players

The first tier of the companies operating in the Indian BMS market includes Honeywell, Siemens, Sauter and Johnson Controls. It is estimated that Honeywell is leading the BMS market with Siemens placed second and Johnson Controls third. With a very good network of dealers and distributors, Honeywell dominates the market with approximately 35-38% market share for the HVAC segment in 2005. Approximately 30% of revenues are generated through the Product Sales Division and 70% are generated through the Systems Sales Division.

In 2005 Siemens holds second place if we consider all building automation together (HVAC, security and fire). However, it is placed third in the HVAC BAS segment. In 2004, Siemens, for instance, won the largest project in Delhi for 4,800 data points. The total value of the project (including HVAC, fire and security) was worth 1.3 Euro million. It is estimated that in 2005, Siemens will have 20% market share of the total market for building management systems (fire, security and HVAC). Moreover, during 2003-2005 Siemens SBT (Siemens Building Technologies) division grew three times faster than the overall market size. 50% of the company's revenues are coming from the Systems Division and 50% of the total sales are coming from the Products Division.

Sauter in India is represented by Race Technologies. Sauter holds a very strong position in the market and placed third in the HVAC BMS segment. Sauter is strongly competing with Johnson Controls.

Schneider Electric entered the market 14 months ago. The largest share of the revenues is coming from the shopping malls business. For Schneider Electric, product sales comprise 20% of the total revenues and systems sales comprise 80%.

Trane has a very good reach in terms of distribution, although does not hold a significant market share.

Belimo actuators have sold very well. The company made a late entry into the market in 2005, although actuators were sold in the past through distributors. Having little competition in the actuators segment, Belimo has also started promoting an extended portfolio including VAV and ball valves.

System divisions of international companies are also competing with local system integrators. For instance, Zicom is the largest Indian system integrator for Embeded Electronic Security. Consulting engineers such as Spectral Services Consultants, Eskayem, Dikshit and consulting divisions of Blue Star and Voltas are all actively promoting building automation services.

Regional distribution

In terms of regional distribution, the majority of BAS sales are coming from the South - mostly IT industry and commercial buildings; followed by the North and West where the majority of sales come from the hotel business and hospitals as well as the pharmaceutical industry. Recently, the East has started contributing to the growth of the BMS market. The retail sector is the major focus of the BAS market. Around 20 very big shopping malls and 100-150 smaller shopping malls are built in each city (Delhi, Chennai etc). Airports are another area of growth. The commonwealth games in 2010 has spurred the constriction of hotels in the Northern and Western regions that will positively affect the BAS market.

NB This article is based on telephone interviews with Schneider Electric, Siemens, Sauter, Belimo; face-to-face interviews with Johnson Controls, Trane, Blue Star, Voltas, the biggest consulting engineer Spectral as well as consulting engineering company Eskayem. The exact market size for BMS can be measured precisely only by conducting face-to-face interviews as the market is very complex and includes the following channels: direct and indirect sales, product and systems sales, product imported through local offices and products imported by construction companies directly.